One of the most important – albeit less thrilling – responsibilities business owners need to pay attention to is their paperwork.
Although essential when it comes time to pay your taxes in the spring, having your key documents organized and ready is crucial for when you want to access financing. These are three important documents you need.
1. Balance sheet
A balance sheet provides an image of what your business’ finances look like at the moment, by revealing your assets. This document, in short, shows what equities remain in your business after all liabilities are removed. There are, of course, distinctions to be made between different types of assets – but the balance sheet aims to show what your business’ current financial standing is.
2. Profit and loss statement
Often referred to as an income statement, a profit and loss statement shows what your net profit is by subtracting your operating expenses from your gross profit. So not only does this statement show potential investors how much money you can make with specific overhead costs attached, but it can also help individuals and potential lenders to get a handle on how much money your business could make in future months and years.
3. Cash flow statement
A cash flow statement is exactly what it sounds like – it shows how much is coming into your business in revenue, and how much is going out in terms of costs. Like all these other documents, it provides an essential snapshot of your business’ financial activities – and can play a crucial role in earning your small business loans.
What financial documents do you keep at the ready?
Tell us in the comments below.